Taxes are on the minds of many as we approach the end of the year. If you ask an accountant, they are likely to suggest that a little advance planning could help minimize the tax collector’s cut of your estate after your final year of life.
According to Jackie Leung, chartered professional accountant, owner of SHL Leung & Co. Inc. and a volunteer on Langley Memorial Hospital Foundation’s Legacy Giving Advisory Committee, ways to minimize tax liability include having a will in place and investment planning, including charitable giving.
Leung said she advises her clients to have a will, especially if they are over the age of 50.
“Without a will, the government will have control of your estate,” she said.
After a will is in place, Leung works with her clients to forecast their tax situation, and recommend legacy giving and investment planning options.
“When you pass away, if you have no spouse, almost all you own gets calculated as income or investment income for that year, ” Leung said. “It can be a lot of money in comparison to what you were living on leading up to your final year.”
One way to offset taxes on your income is through legacy giving, which could entail leaving a bequest — the act of giving property by will — or by naming a charity as the beneficiary of one of your registered accounts.
For example, you may designate a charity as the beneficiary of your RRSP or RRIF account.
“You can leave a gift in your will by designating a percentage of your estate to a charity,” Leung said, adding that she helps clients maximize their donation against tax liability.
“For someone who is interested in legacy giving, I forecast their tax situation and then recommend a certain percentage.
“By making a legacy gift, you’re helping the community and at the same time you get donation credits,” Leung continued. “If you’ve got donation credits, you’re actually better off.”
Donation by will or by assigning the charity as the beneficiary can apply to the last two years of your returns. The donation value is limited to 100 per cent of the net income for the deceased, instead of 75 per cent for a regular tax payer. In this way, a legacy donation is able to reduce the tax bill to $0 as well as generate a big refund if you paid a lot of tax the year before you passed away.
Minimizing tax on your estate means leaving more for your family and community, and less to the Canada Revenue Agency.
“Through legacy giving, you’re transferring the money you would be paying to the government, to the community,” Leung said.
“It’s always good to give back to the community, especially if you’ve enjoyed a good level of service from an organization like Langley Memorial Hospital Foundation.”
If you have questions, Leung suggested contacting an accountant, a financial advisor and/or lawyer who can help you navigate the legacy giving process.
Visit Langley Memorial Hospital Foundation online for access to legacy giving resources, such as sample will clauses, as well as contact information for members of Langley Memorial Hospital Foundation’s Legacy Giving Advisory Committee who can discuss aspects of your personal estate plan, including charitable giving options.